7 Things to Know as Affordable Care Act Deadline Approaches
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Is your business prepared? On Jan. 1, 2015, small businesses across America will be required to be in compliance with the Affordable Care Act (ACA), which requires employers with 100 full-time employees or more to offer healthcare insurance. In 2016, employers with 50 to 99 employees will be required to comply.
As some small businesses consider trimming head counts, many others are frantically crunching numbers to ensure they’ll be able to handle the added expense. Failure to provide compliant healthcare coverage will result in stiff penalties that could sideline businesses with more limited budgets.
Here are a few things small-business owners should know about the approaching ACA deadlines.
1. A slow start
While enrollment numbers were never provided for the small-business enrollment portals, known as SHOP exchanges, reports have the program off to a slow start. Technical glitches and late rollouts of promised features led to a delay in enrollments, which contributed to the government’s decision to delay enrollment by a year.
2. Preparing for the expense
As the deadline nears, many small businesses are trying to find a way to afford the percentage they’re required to spend toward each employee’s costs. The cost of healthcare premiums cannot exceed 9.5 percent of a full-time employee’s salary and at least 70 percent of a business’s employees must be offered an affordable insurance option.
In 2016, this number increases to 95 percent, with employers required to offer affordable healthcare to the vast majority of their workforces. Depending on the healthcare option chosen and employee salaries, this means a business may face a significant cost to offset the difference.
3. Avoiding the expense
For some small to medium businesses, the dilemma isn’t necessarily how to pay for the expense, but how to get around it. One option is to reduce the number of employees, but many other businesses are considering limiting each worker’s hours to less than 30 per week. Once an employee reaches 30 hours of work, the ACA requirements kick in.
Paying the $2,000 penalty for each worker who exceeds 30 hours is also an option, but some businesses may choose instead to hire contractors or outsource work to professionals who won’t require benefits.
4. Limited choices
One complaint of employees is that options are limited. Where private insurance options have traditionally given consumers a wide range of options for its members, Obamacare’s insured must select from a small group of medical providers who accept the insurance.
In some areas, no covered emergency services are available, requiring patients to pay out of pocket to get the help they need without traveling a long distance. Employers should understand this early on in order to respond to complaints from workers who are disappointed that they can’t continue to visit a longtime medical provider.
5. Limiting growth
For some businesses, the healthcare requirements could stunt growth. Instead of adding a 50th or 100th employee, for instance, a company could choose to remain with the number of employees it currently has. Over time, businesses may begin to realize that the cost of providing care to employees doesn’t compare to the amount of extra income a few additional employees can bring in.
6. IRS mandates
Starting in 2015, employers will be required to file an annual return that documents the healthcare benefits provided to each employee. You may also be required to include the value of any healthcare insurance coverage on each employee’s W-2 form.
For some businesses, the cost of healthcare coverage may be offset by the Business Health Care Tax Credit, which is designed for businesses that cover at least half of their full-time employees if less than 25 percent of those employees make less than $50,000.
7. Wellness programs increasing
One side effect of the ACA is that businesses of all sizes are becoming more aware of the healthcare costs employees are incurring. To reduce costs, businesses are implementing wellness programs, where employees are encouraged to engage in healthy behaviors. By implementing smoking-cessation programs and encouraging regular wellness visits, employers can keep claims -- and, as a result, premiums -- low.
As small businesses feel pressured by approaching ACA deadlines, they’ll likely continue to have questions. A section of Healthcare.gov has been dedicated to small businesses, providing information about deadlines, costs, tax credits and more.